On May 16, 2025, the Securities and Exchange Board of India (SEBI) issued a circular extending the timeline for implementing key provisions of its earlier directive dated December 17, 2024. The move addresses industry concerns about regulatory arbitrage related to Offshore Derivative Instruments (ODIs) and Foreign Portfolio Investors (FPIs) with segregated portfolios.
Background: Regulatory Tightening to Prevent Arbitrage
In December 2024, SEBI released Circular which sought to address loopholes and enhance transparency in the operation of ODIs and FPIs, particularly those using segregated portfolio structures. The circular introduced a series of new disclosures and compliance requirements aimed at curbing regulatory arbitrage, ensuring fair play, and aligning FPI and ODI operations with broader market regulations.
While some provisions of the December circular came into effect immediately, SEBI had originally allowed a five-month period (until May 17, 2025) for implementing paragraphs 2.2 to 2.7 of the directive—those that pertain to the enhanced disclosures required from ODI subscribers and FPIs with segregated portfolios.
Industry Feedback Prompts Extension
Citing extensive feedback from stakeholders—including FPIs, custodians, depositories, and stock exchanges—SEBI has now extended the implementation deadline for these specific provisions to November 17, 2025. This six-month extension aims to provide market participants with sufficient time to adapt their systems, processes, and internal compliance mechanisms.
Depositories had been specifically instructed to establish appropriate infrastructure to ensure seamless compliance with the new rules. The extended deadline reflects SEBI’s pragmatic approach in balancing regulatory oversight with operational feasibility.
What Remains Unchanged?
It is important to note that all other provisions of the December 17, 2024 circular remain unchanged and in effect. The extension applies only to the disclosures under paragraphs 2.2 to 2.7 and the related compliance mechanisms as specified in paragraphs 4 and 5 of the original circular.
This includes measures aimed at enhancing transparency in ODI issuance, greater oversight over underlying investors, and closer monitoring of the flow of capital through FPIs—especially those using complex structures.
SEBI’s Regulatory Mandate
This circular has been issued under SEBI’s statutory powers granted through the SEBI Act, 1992 and the SEBI (Foreign Portfolio Investors) Regulations, 2019. It also references the Prevention of Money-laundering (Maintenance of Records) Rules, 2005—highlighting the interconnection between securities regulation and broader efforts to curb illicit financial flows.
SEBI’s commitment to ensuring a transparent, fair, and globally aligned securities market is once again on display. By providing market participants with more time to comply, the regulator is fostering cooperation and ensuring robust implementation of reforms.
Conclusion
The extension until November 17, 2025, gives stakeholders valuable breathing room while reinforcing SEBI’s commitment to regulatory integrity. Market participants are encouraged to use this period to prepare thoroughly, ensuring that the enhanced compliance framework is implemented efficiently and without disruption.
